Washington, DC and New York City are both taking bold new steps to tackle their largest source of carbon emissions and improve the efficiency of the buildings that make up their skylines. Despite many parallels, the cities’ new building laws have important differences. Below are some of the key differences, why they matter, and what steps each city is taking to succeed.
The District of Columbia (DC) and New York City (NYC) both recently passed bold laws to meet their commitments to slash their greenhouse gas emissions in half in a little more than a decade and by 80+% by 2050. By passing the first two laws in the country that require broad swaths of existing buildings to improve their energy performance, the two cities catapulted themselves ahead of every other U.S. jurisdiction. What do they mean for each city and their real estate communities? How are they different? To realize the full economic, environmental, and health impacts of the new laws, both cities will need to wisely and effectively implement their legislation. And, they’ll need to take additional bold steps addressing buildings, transportation and waste to meet their climate commitments.
How do the Clean Energy DC Omnibus Act and New York City’s Local Law 97 (formerly Int. 1253*) Compare?
In both cities, buildings account for the lion’s share of greenhouse gas emissions (74% in DC and 67% in NYC). To meet these ambitious climate goals, public and private buildings must be made dramatically more energy efficient. Fortunately, both cities are already longstanding leaders in green building, green building codes, and climate and energy policies. Each benefits from having sophisticated building industries and tenants and consistently rank within the top 5 cities for the most ENERGY STAR- and LEED-certified buildings. In fact, DC was named the world’s first LEED Platinum city in 2017. Yet both DC and NYC stand to reap an economic windfall of billions in cost-saving opportunities by putting the petal to the metal on energy efficiency and distributed energy resources as alternatives to building new gas and electric distribution infrastructure.
Despite their similarities and starting from a strong foundation, the two cities have important differences, and many crucial steps remain to implement their building laws to have the greatest impact. Below are some of the key differences between the District’s Clean Energy DC (CEDC) Omnibus Act and Local Law 97 (the center piece of New York City’s Climate Mobilization Act), why they matter, and what steps each city is taking to succeed.
NYC Builds on a Decade of Leadership
Since their passage in 2009, NYC’s Greener Greater Building Plan laws (GGBP) have been the gold standard for addressing the root causes of wasted energy in existing buildings. Along with efficiency incentives and innovative programs like NYC’s Retrofit Accelerator and Building Energy Exchange, the GGBP laws form a package that serves as a model for other cities, including DC. Currently, DC funds less generous incentives than are available in NYC; following NYC’s lead, DC is in the process of standing up a high-performance building hub.
While NYC’s GGBP package is helping drive energy efficiency in buildings, it is not at the pace needed to meet the city’s climate commitments. Incorporating LL 97 into the package provides the best model to date of the comprehensive approach that will be needed to transform a city’s real estate market and meet bold climate commitments.
DC Benefits from its Unique Combination of City and State Powers
New York’s gas and electric utilities are regulated at the state level. In contrast, DC is uniquely a city and a de facto state that regulates its utilities. Using this power, DC included a nation-leading 100% renewable energy portfolio standard (RPS) as a central plank of its CEDC law, which must be met by 2032.
DC Focuses on Energy Reductions, While New York Focuses on Carbon Reductions
New York’s LL 97 sets annual carbon intensity limits on building emissions, including emissions from electricity consumed by covered buildings 25,000 square feet and larger. The law can therefore be thought of as a “building carbon performance standard.” LL 97 applies to NYC’s 50,000 largest buildings, which account for only five percent of the total number of properties in the city but which consume nearly 60% of all energy in buildings in NYC.
DC’s BEPS is built on the popular federal ENERGY STAR 1-100 building energy
efficiency rating system.[1] In
doing so, DC is relying on a metric that is widely used and respected by DC’s
building community and their tenants. Purchases of green electricity generated
off-site do not impact ENERGY STAR scores, thereby focusing owner and tenant
attention on the key opportunities of energy efficiency and to a lesser degree
on-site renewable generation. And, ENERGY STAR accounts for weather, occupant
density, operating hours, and other factors which from a fairness perspective should
not affect a building’s score.[2]
Both ENERGY STAR scores and NYC’s carbon intensity limits are massively correlated with progress against greenhouse gas emissions, but neither is a perfect match. Future rulemaking will ultimately determine which metric will be a better match.
Work to improve buildings’ energy efficiency will create local jobs, improve resiliency, reduce utility bills, increase property values, make buildings healthier for occupants and improve both ENERGY STAR scores and carbon intensity. Purchases of distantly generated renewables satisfy RPS requirements and (pursuant to future rulemaking by NYC) will likely improve carbon intensity but such purchases produce none of the benefits above. .
When Will Each Law Affect Real Estate?
As a next step, DC will define through rulemaking a number of property types (e.g. all office buildings might be grouped as one type), evaluate the ENERGY STAR scores of every building in each type, and set a performance standard for each type that is no lower than the median score for buildings of that type. Therefore, at least half of all buildings will have to improve their performance by picking from one of these options: 1) improving its ENERGY STAR score to the level of the BEPS, 2) reducing its normalized energy consumption by 20%, or 3) picking from a menu of prescriptive options that will be developed during rulemaking, but which are required by the law to equal 20% reductions in consumption.
The process will repeat every five years so the energy performance bar will naturally ratchet up. This approach has the virtue of flexibility and fairness for building owners (e.g. no owner will ever be required to cut its energy use by more than 20% in a five-year cycle), however it provides less certainty regarding the amount of emissions reductions it will generate, especially in the out years.
In contrast, NYC’s LL 97 spells out carbon intensity limits that will effectively require improvements by the bottom 20% of worst performing buildings in the initial 2024-2029 compliance period, and by the 75% highest GHG intensity buildings in the 2030-2034 compliance period. The law does not cap the reductions that may be required of a building owner to meet the intensity limits, but it wisely gives NYC’s Department of Building discretion to provide building owners flexibility to cope with financial, legal, or technical limitations. It also requires that by 2021 the Department decide whether and how to set up a system of carbon trading among buildings. Such a system would likely provide an escape valve to reduce total costs while ensuring total emissions reductions and prevent building owners from bearing an excessive financial burden. But, it will be a monumentally difficult job for the Department to establish a trading system that is fair and effective while balancing many important interests including environmental justice.
In both cases, the key outcomes are still subject to rulemaking processes. In contrast to DC’s approach, LL 97 places a higher value on certainty regarding the level of emissions reduction that will be achieved than on providing certainly regarding the impact to building owners.
Which Law Has the Bigger Climate Impact?
DC preliminarily projected that in 2032 its CEDC law will reduce greenhouse gas emissions by nearly three million tons of carbon-dioxide-equivalent annually, equal to removing over 600,000 cars from the road. The NYC Mayor’s Office of Sustainability estimates that LL 97 will cut the much larger city’s greenhouse gas emissions equivalent to nearly six million tons of carbon dioxide per year by 2030 (equivalent to removing 1.3 million cars from the road), making it likely the biggest positive climate impact ever of any single law adopted by any city.
Nevertheless, while LL 97 saves more in absolute terms, DC’s law saves more in relative terms–over 40% of DC’s entire carbon footprint relative to the 2006 baseline. To be fair, a little over half of DC’s savings come from its RPS–an option not available to NYC.
Of course, these savings will depend on robust and effective rulemaking and implementation of the new laws, and building owners, utilities and local stakeholders responding in a positive and proactive way that leads to transformation of the real estate market. For instance, building owners need to quickly begin the process of understanding what improvements they’ll need to make to their buildings, pricing out those improvements, and integrating them into their capital plans. Sophisticated building owners started this before the laws’ passages because they know that measuring and managing energy use and improving efficiency is a smart investment.
Now, a concerted push is needed to make sure that even the smallest owners do so and are able to reap the benefits of efficiency and clean energy; as part of this push, NYC has tripled the budget and staff of its Retrofit Accelerator. Similar to when DC and NYC passed energy benchmarking and transparency legislation a little over a decade ago, these new building performance laws put the cities ahead of their peers. But even if the laws are fully and vigorously implemented, both cities will need to do more. The cities will need to take additional bold steps to be on pace to meet their climate commitments. IMT stands ready to help them in this critical work and to help other cities build upon and surpass the two leaders so that they benefit their economies, their residents, and the planet.
[1] BEPS will rely on normalized energy use intensity for buildings ineligible for ENERGY STAR 1-100 scores. DC will also consider the possibility of switching to a carbon-based metric in future compliance cycles.
[2] ENERGY STAR scores are based on crunching data from the US Energy Department’s quadrennial Commercial Buildings Energy Consumption Survey (CBECS). It is critical that future CBECS surveys do more to improve, including by oversampling large buildings so that future versions of ENERGY STAR will better normalize for factors like occupant density. DC’s use of city comparable averages mitigates the effect of ENERGY STAR’s imperfections especially as it pertains to localized differences.
*A version of this blog originally appeared on GreenBiz.com. On May 18th, Intro 1253 was passed into law as Local Law 97 of 2019. This blog has been updated to reflect that.
